Role of Government

•Compulsory contribution imposed by government on the individual and institutions

•Major source of government revenue

•Direct and indirect taxes

b)Borrowing

•Government borrows from institutions within the country (internal debt) and outside the country (external debt)

c)Economic activities of government

•Sale of goods and services to general public

d)Fees and Fines

•E.g. licence fees, fine for violation of traffic rule

e)Printing Of New Notes

•Seldom used because it tends to be inflationary

Government Expenditure

2 types of government expenditure: -

a)Ordinary Expenditure

b)Development Expenditure

a)Ordinary Expenditure:

It is incurred in day-to-day routine work and is recurrent year after year.

i.Common Services: expenses incurred by the various departments and ministries.

ii.Expenditure on the public debt: servicing of internal and external debt i.e. interest payments and money repayment.

iii.Defence, police and justice: cost of maintaining police and armed forces and law courts.

iv.Social and the community services: expenditure on education, health, social welfare and public works.

v.The Economic Services: promotion of productivity and economic growth in various sectors e.g. manufacturing, transport, construction, communication and public utilities.

b)Development Expenditure

Expenditure incurred for purpose of economic & social development e.g. building of schools, hospitals, roads and express ways, drainage and sewerage systems, development of residential estates.

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